First-time homebuyers don't consider all costs

Many first-time homebuyers hope to purchase a single detached home but end up in a townhouse or condominium, according to a recent RBC survey, which polled 1,050 Canadians.

The difference between dream and reality likely comes down to proper financial considerations, suggests Marcia Moffat, RBC’s VP of home equity financing.

“Affordability isn’t just the house price—it’s thinking about maintenance of the home, taxes, legal feels, and if it’s a young family, factoring in childcare costs,” she told the National Post. “Sometimes when someone is in the market of intending to buy, they haven’t thought through all those elements. Then when they actually come down to buying, it’s part of the whole approval process.”

One mistake some first-time homebuyers make is turning to their parents to understand mortgages rather than a professional. That’s not always smart, said Moffat, since what was right back then may not be right for the present-day consumer.

“I’ve heard parents say, ‘You should go into a 10-year fixed,’ but those were parents who lived through the late ‘80s at a time of very high interest rates and uncertainty,” she added.

The study also revealed first-time buyers are more likely to opt for either fixed or variable rate mortgages, while older first-timers are more comfortable with variable rates than their younger counterparts.